SALIENT FEATURES OF THE BUDGETARY MEASURES PROPOSED FOR SINDH SALES TAX ON SERVICES.

Transcription

1 SALIENT FEATURES OF THE BUDGETARY MEASURES PROPOSED FOR SINDH SALES TAX ON SERVICES. I. RELIEF MEASURES: The standard rate of 16% Sindh sales tax has been reduced to 15% with a view to providing relief to the taxpayers, service recipients and consumers. N.B: In the Federation, the standard rate of sales tax continues to be 17%. II. BALANCING MEASURES: The reduced concessionary rate of 4% Sindh sales tax has been increased to 5% with a view to reducing the gap between the standard rate and the reduced rate. N.B: The 4% reduced rate applied to only 4 sectors, namely (i) Legal practitioners & consultants; (ii) Accountants & auditors; (iii) Tax consultants; and (iv) Constructors. This increase will, therefore, not affect common man or ordinary service recipients. III. RATIONALIZATION MEASURES: With a view to removing the disparity in the tax base of Sindh sales tax as against the tax-base of other provinces, Sindh sales tax (SST) is proposed to be levied on certain services which are taxable in the Punjab and/or KPK but are not taxable in Sindh. The details are as hereunder:- S. Tariff No. heading Description Services provided by technical, scientific and engineering consultants Services provided by tour operators. (Hajj and Umrah tour packages shall be exempt) Services provided by manpower recruiting agents. Proposed rate of SST 10% 15% 15%

2 Services provided by share transfer agents. 15% Services provided by property dealers. 10% Services provided by fashion designers. 10% Services provided by interior decorators. 15% Services provided in respect of rent-a-car. 10% Services provided by car or automobile dealers Services provided or rendered by laundries and dry cleaners. (Tax on only such laundries & dry cleaners as are located in hotels, clubs and guest houses; or are franchisers or franchisees; or are having branches or more than one outlet). 10% 15% IV. REMOVAL OF EXISTING ANOMALIES AND DISTORTIONS: For removing certain anomalies and distortions and also for making the scope of tax clear and un-ambiguous, certain services are being specified as leviable to SST:- S. No. Tariff heading Description Advertisement in newspapers and periodicals Workshops for electric or electronic equipment or appliances, etc., including computer hardware Car/automobile washing or similar service stations Proposed Rate of Exemptions, if any SST 5% % Small workshops having annual turnover not exceeding Rs. 3.6 million 15% Services provided or rendered by car/automobile washing or similar service stations, whose turnover does not exceed 3.6 million rupees in a financial year Fumigation services 10% (i) Public health fumigation services provided by the

3 Federal, Provincial or Local Governments and Cantonment Boards; (ii) Agricultural fumigation services Maintenance and 10% Maintenance and cleaning services cleaning of private residential houses or apartments shall remain exempt. Maintenance and cleaning services not out-sourced and, instead, provided himself by the owner or his employee, shall also remain exempt Janitorial services 10% Janitorial services not outsourced and, instead, provided himself by the owner or his employee, shall remain exempt Services provided or 5% --- rendered by corporate law consultants Services provided or rendered by call centres 15% --- V. REVIEW OF CERTAIN EXISTING EXEMPTIONS: Certain existing exemptions have been reviewed/amended with a view to providing clarity and non-ambiguity and also for plugging possible avenues of evasion/avoidance and disputes:- S. No. Tariff heading Extent of review Beauty parlours/clinics having annual turnover of Rs. 3.6 million are exempt. Certain conditions regarding location, branches/outlets/franchise and utility bills (not exceeding Rs. 40,000/-) shall be added to the abovesaid threshold of Rs. 3.6 million annual turnover Internet and broadband services valued at less than Rs. 1,500/- per subscriber per month are exempt. The condition of upto 2 mbps shall be added to the said threshold.

4 The exemption on life insurance and health insurance are withdrawn. However, premiums in relation to personal/individual life insurance of upto Rs. 5 lac shall remain exempt Construction services provided to the SST-paying builders & developers are exempt. Since builders and developers are not yet tax complaint, this exemption is being withdrawn VI. NEW LEVIES: For broadening the tax base in Sindh, certain new services are proposed to be levied to SST at reduced concessionary rates:- S. No. Tariff heading Description Proposed concessionary rate of SST Exemptions, if any Cable TV operators 10% Cable TV operators holding PEMRA s R category license Programme producers and production houses 10% Services provided or 5% --- rendered by persons engaged in inter-city transportation or carriage of goods by road or through pipeline or conduit Education services 5% Education services provided or rendered against fee not exceeding as follows:- Fee per subject/ course Fee per total subjects/ courses (a) Where fee is charged on per month basis Rs. 2,000/- Rs. 5,000/-; (b) Where fee is charged on per trimester basis Rs. 6,000/- Rs. 15,000/-; (c) Where fee is charged on per semester (of 4 months) basis Rs. 8,000/- Rs. 20,000/-;

5 Services provided or rendered by hospitals & clinics, pathological, medical diagnostic clinical and radiological laboratories. (d) Where fee is charged on per semester (exceeding 4 months) basis Rs. 12,000/- Rs. 35,000/-; and (e) Where fee is charged on annual basis Rs. 24,000/- Rs. 60,000/-. No exemption on the education services provided or rendered in air-conditioned areas like classrooms, lecture rooms, coaching rooms, seminar rooms/halls or hotels or motels: No exemption in case the person or the institution or the establishment providing or rendering education services is a franchiser or a franchisee. 5% Fee/charges below the prescribed threshold (room/bed/ward charges not exceeding Rs. 1,500/- per patient per bed and doctors consultation/visit fee or charges not exceeding Rs. 1,000/- per patient per visit/consultation) shall be exempt. VII. REVIEW OF WITHHOLDING RULES: The Sindh Sales Tax Special Procedure (Withholding) Rules, 2011, are proposed to be amended to disallow withholding of Sindh sales tax by the service recipients not resident in Sindh and/or not having a place of business in Sindh. While the whole of the 15% of SST on advertisements shall continue to be withheld by the withholding agents in Sindh, a uniform rate of one-fifth of the tax amount shall be

6 withheld by other withholding agents (i.e. the service recipients of taxable services other than advertisement) in Sindh. VIII. TARIFF SCHEDULE: Instead of the existing positive tariff schedules (existing Schedules I and II of the Sindh Sales Tax on Services Act, 2011), all services (as are provided or rendered in Sindh or from Sindh) shall be declared to be taxable w.e.f , when the existing positive tariff Schedules will be substituted with a negative tariff Schedule (showing exclusion from tax liability) in the next budget N.B: 1. For authentic and legal version of the proposed budgetary measures, kindly refer to the Sindh Finance Bill, 2014, as introduced in the Sindh Assembly on June 13, For the reduced concessionary rates of tax (i.e. the tax rates of 10% and 5%, as mentioned above in this paper), the exemptions and conditions thereof, necessary notifications, effective from , shall be issued. 3. The proposed Withholding Rules (effective from ) shall also be issued through notification. 4. E & O E.